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The U.S. Postal Service has become an unlikely flashpoint in the Covid-19 pandemic, finding itself at the center of arguments over relief funds both for institutions and consumers as its revenues have dropped during shelter-in-place periods around the country.
The Post Office receives no taxpayer funds and has struggled financially since 2006, when Congress required it to prefund health-care and retirement benefits for all of its employees for 50 years. It reported a net loss of $4.5 billion for the quarter ending March 31, more than twice what it lost in the same quarter the year before.
Note that this was mostly before the pandemic and the subsequent drop in mailings. Officials have said the postal system could be insolvent before the end of 2020 without a bailout of its own. Advocates say the USPS should receive emergency funds, but the White House has opposed any support for it unless it raises prices.
One proposed solution is to allow the Post Office to offer banking services. The proponents of this idea say the service could earn revenue while bringing financial services to Americans whose need has been demonstrated by the pandemic.
About 8.4 million American households do not have bank accounts, meaning that they would need to receive paper checks for their relief payments. Paper checks have a number of problems, not the least of which is that cashing them would require breaking shelter-in-place and, potentially, social-distancing protocols.
In a New York Times OpEd published in late April, Sen. Kirsten Gillibrand, D-N.Y., said that allowing the Post Office to offer banking services could solve both problems. She had already introduced Senate Bill 2755, “The Postal Bank Act,” in 2018. It called for the Postal Service to offer small-dollar loans of up to $500 at a time and deposit accounts that could not go over $20,000.
Gillibrand’s bill also calls for transactional services in addition to basic accounts, including “debit cards, automated teller machines, online checking accounts, check-cashing services, automatic bill-pay, and mobile banking….”
Postal-banking supporters say by offering bank accounts and payment tools like debit cards, the problem of direct deposit and electronic payments for unbanked people would be solved. They point to similar programs in other countries, the fact that the USPS offered savings accounts from 1918 to 1966, and its network of 31,322 locations as proof that it could work.
Opponents say the Post Office should not compete with private banking and that there are private-sector options for delivering financial services to all communities. The USPS also has had its share of customer-service issues over the years that might make people avoid trusting it with their money.
On top of its existing issues, the Postal Service would face considerable expense in starting up new services, training its staff, and upgrading its infrastructure. And there is no guarantee that it would be able to price its financial services in a way that would make them profitable.
But between turning the Post Office into a bank and not allowing it to do anything lies a third way. The Post Office has provided some financial services over the years, including money orders, international remittances, and, more recently, gift cards. These products could be expanded and offered with partners.
For example, the Postal Service could sell general-purpose reloadable prepaid cards in addition to the gift cards it already offers and serve as a reload point for those cards. This would allow post offices to become doorways to the financial mainstream by adding on to existing services rather than by building new systems.
—Ben Jackson, bjackson@ipa.org
